Beijing: China’s economy has grown faster than expected in the first three months of 2026, even as the Iran war involving the United States and Israel has created disruptions across international markets. The latest official data shows that the world’s second-largest economy is still managing to expand, though outside pressures are starting to build in important areas.
Between January and March, China’s gross domestic product (GDP) increased by 5 percent compared to the same period last year. Economists had estimated growth to be around 4.8 percent, but the final numbers came in higher.
This is also the first set of official numbers released after China revised its annual growth target to a range of 4.5 to 5 percent. Showing a more cautious approach to long-term planning, the revised target is the lowest Beijing has set since 1991.
In the previous quarter, growth stood at 4.5 percent. The latest figure shows a clear improvement on paper.
Manufacturing and exports lead the push
Manufacturing played a major role in driving the latest growth numbers. Strong output from factories, along with higher exports of cars and industrial goods, helped support the overall economy.
Analysts said that automobiles and export-driven sectors have contributed heavily to the GDP performance. They also said that the full impact of the Iran war is still developing and may show up in the next quarter’s data.
At the same time, China continues to deal with weaker property investment, which has been putting pressure on its economic balance for some time.
Government plans economic reset
China’s leadership has been working on restructuring the economy through its new five-year plan announced in March. The plan includes higher spending on innovation, high-tech industries and efforts to boost domestic consumption.
The ruling Communist Party is also trying to manage long-term issues such as lower birth rates, reduced household spending and an ongoing property slowdown.
External pressures from war and trade tensions
Beyond domestic challenges, external pressures are also building. The Iran war has added pressure on energy markets, while trade tensions with the United States continue to affect Chinese exports.
China currently is facing a 10 percent tariff on most of its goods entering the US market. However, US Treasury Secretary Scott Bessent has said that these duties could be adjusted by early July, depending on legal and policy decisions in Washington.
US President Donald Trump is also expected to meet Chinese President Xi Jinping in China in May, which could influence future trade talks between the two countries.
Export growth slows after strong start
China’s latest customs data shows a slowdown in export growth in March. It dropped to 2.5 percent, its weakest level in six months.
Earlier, combined export data for January and February showed an increase of more than 20 percent compared to the previous year. That rise was driven mainly by strong demand for electronics and manufactured goods during the Lunar New Year period.
China combines early-year trade data to smooth out holiday-related fluctuations, as the Lunar New Year falls on different dates each year.
Imports rise, trade surplus shrinks
March also saw imports rise by nearly 28 percent, according to the General Administration of Customs. As a result, China’s monthly trade surplus stood at only over $50 billion, the lowest in a year.
Economists say higher import costs may be driven by rising international prices following the Iran war. This includes higher costs for crude oil and raw materials used in industries such as plastics.
Energy and shipping facing challenges
Tensions in the Strait of Hormuz have pushed up international oil prices. Iran’s warnings against ships using the strategic route have added uncertainty in energy markets, and it is affecting shipping and production costs across the world.
While China depends less on Gulf oil compared to countries such as Japan and South Korea, it is still feeling the impact. Petrol prices in the country have begun rising, and higher jet fuel costs have already led some airlines to reduce flight operations.
What this means going forward
Analysts say the effect of tensions around the world could start showing more clearly in China’s export numbers in the coming months. If rising prices reduce consumer spending in major trade partner countries, China’s export growth could slow further.
Performance ultimately depends on the strength of partner economies, and maintaining very high growth rates over time is difficult in a volatile environment across the globe.
